Despite increasing pressure on the public finances, the Chancellor has largely stuck to her promise that there would only be one major fiscal event each year. The message from this Spring Statement 2025 was that the world has changed significantly since the Budget last October, but that the government remains committed both to economic growth and to the Chancellor’s ‘non-negotiable’ fiscal rules. Much of the Chancellor’s statement to Parliament focused on the changes to public expenditure needed to stay within these rules despite an overall halving of projected growth over the coming year.
There were, however, some tax-related measures announced, including some promised consultations, which we summarise below. Perhaps more significant for many taxpayers – individuals and businesses alike – was what was not said. Despite significant pressure from affected groups, the changes to employers’ National Insurance Contributions (NICs) and those to business and agricultural property reliefs from inheritance tax are going ahead as planned. These are likely to have a significant impact on those affected so anyone who has waited in the hope that the October announcements would be reversed should make sure that they are planning for the potential impact now.
Many businesses in the real estate and construction sector will welcome the government’s announcements, building on those in the Autumn Budget, for further investment in infrastructure and housing. Most notably, the Spring Statement announced an additional £13 billion investment in capital infrastructure projects over the next five years alongside the launch of a construction skills package to train an additional 60,000 skilled workers. There is also a boost for housebuilders with an additional £2 billion investment in social and affordable housing. These measures, alongside a number of similar measures announced in the autumn, will be seen as promising developments for the sector.
Bar a significant uptick in the UK economy, it is likely that the Autumn Budget later this year will see more significant tax changes than those announced today. Before then, we will also have the final outcome of this Spending Review round in June, which will set the departmental budget for HMRC, and the publication of a ‘transformation roadmap’ which will set out HMRC’s plans to become a ‘digital first’ organisation – which will inevitably see changes to how taxpayers interact with government.
Corporate and business tax
The Spring Statement did include some developments pertinent to corporate and business taxation, although they were largely in line with pre-announced policy developments set out in the Corporate Tax Roadmap 2024 published at the Autumn Budget.
Many employers will be disappointed that there was no reversal of the changes to employers’ NICs which are due to take effect from 6 April 2025. We will, therefore, see the rate of employers’ NICs increase from 13.8% to 15%, and the threshold at which employers’ NICs begin to be paid reduce from £9,100 to £5,000 per annum from that date. These changes, together with the increase to the National Minimum Wage, also effective from April 2025, mean that the operating costs of many businesses are scheduled to rise significantly next month.
The majority of the other announcements feed, from a policy perspective, into the government’s drive for economic growth by either encouraging investment or ensuring certainty of treatment for businesses and investors.
The two key announcements, both subject to public consultation over the coming months, are as follows:
Research and development tax relief advance clearances
The government is seeking to revitalise the existing advance assurance procedure for research and development (R&D) tax relief. Over the past few years, HMRC has introduced new administrative requirements for those making a claim and significantly increased the number of enquiries they undertake into those claims that are made. Although these changes have been made in order to tackle the level of erroneous and fraudulent claims that were being made, they have had a significant impact on those businesses undertaking genuine R&D activity. An improved advance assurance process would, therefore, be welcome, and the government has put forward a broad set of options for comment. A new advance assurance procedure could be introduced at the pre-activity, pre-claim, or post-claim (but pre-payment) stage, and the government is inviting comments on whether any such scheme should be voluntary or mandatory and specific to certain sectors or more general.
Advance tax certainty for major projects consultation
Alongside the announcements of increased public capital investment into UK infrastructure and housing stock, the government is also seeking to develop a new process which will allow for companies to be given certainty on their tax position in advance of major UK investment projects. This facility will only be available to corporate entities directly undertaking major investment projects, with a threshold set by reference to qualifying expenditure. The consultation document indicates that the government expects the threshold to be set in the hundreds of millions (of pounds sterling) so that “dozens, rather than hundreds, of projects” are eligible each year. Whilst those large corporate investors incurring substantial expenditure on complex investment projects will welcome the possibility of obtaining advance clearance as to the tax treatment of the investments, the limited scope of the clearance facility will be disappointing for all but the very largest investors in the UK.
Other announcements
The government announced at the Spring Statement that, as part of its focus on growth, it will explore how the Enterprise Investment Scheme (EIS), Seed Enterprise Investment Scheme (SEIS), Venture Capital Trust (VCT) scheme, and Enterprise Management Incentives (EMIs) support entrepreneurs and venture capital firms. We are expecting the government to hold a series of roundtable discussions with key stakeholders in the coming months and await further details thereafter. A recent report from the Treasury Select Committee noted that the use of sunset clauses (i.e. expiry dates for the regimes) promoted investor uncertainty, and it will be interesting to see whether this is an area for future change.
On the topic of entrepreneurial businesses, the government has also provided further updates on their attempts to tackle “phoenixism”. The process of phoenixism broadly involves shareholders winding up companies or businesses, withdrawing their capital, and subsequently recommencing a similar or analogous business through a new entity to benefit from favourable capital tax treatment on the withdrawal of funds. Tax legislation has been in place to tackle the tax advantage obtained from phoenixism for some time, but the government has now announced that HMRC, Companies House, and the Insolvency Service are seeking to tackle the use of insolvency procedures to avoid tax and write off third-party debt in a contrived way. The joint plan will consider the use of upfront payments, personal liability notices, and the increased use of enforcement sanctions. We will, however, need to await further information on these proposals to understand the detail.
The Spring Statement also included a reminder that the Building Safety Levy (BSL) will be introduced from 1 October 2026. The levy is expected to apply to new residential developments in England to help fund public expenditure on building safety. The government previously ran a technical consultation and has now published a response to that consultation, developing a number of exemptions and reduced rates for certain developments (e.g. affordable housing, developments of less than 10 units, and previously developed land).
Private client
Despite considerable lobbying, particularly from farming groups, the Spring Statement made no changes to the inheritance tax measures announced in the Autumn Budget. An aggregate £1 million cap on the value of property benefitting from the 100% rate of business and agricultural property relief remains set to take effect from April 2026. A consultation on the detail of the measure – and in particular how the rules will work for trusts – is currently taking place. We would recommend that individuals potentially affected by the changes take advice now to ensure that they understand, and have planned for, the effect of the cap on their estate and succession planning.
Making Tax Digital
The government has reaffirmed its commitment to the Making Tax Digital for income tax (MTD ITSA) programme, which will see some taxpayers with trading or property income brought within new record keeping and reporting rules. We already knew that those with relevant income over £50,000 a year would come into the new regime from April 2026, with the threshold reducing to £30,000 from April 2027. The Spring Statement included the announcement that those with relevant income over £20,000 a year, an estimated 900,000 taxpayers, will be within the regime from April 2028.
There will also be some further exemptions from MTD ITSA for individuals with particular types of income. Most significantly, there will be a one-year deferral for those with trading and/or property income over £50,000 who need to complete form SA109 as part of their Self Assessment return. The current version of this form is used by taxpayers with residence, domicile and the remittance basis circumstances relevant to their tax position, and the change means that HMRC will have longer to ensure that the MTD requirements work effectively for those in the new residence-based Foreign Income and Gains regime (which will replace the domicile-based remittance basis from April 2026). Other groups who will be exempt from the MTD ITSA requirements will include:
- non-UK resident foreign entertainers and sportspeople (where their only income that would be in scope for MTD ITSA is in relation to their entertainment/sporting business),
- any taxpayers with a Power of Attorney in place, and
- individuals receiving either Married Couples’ Allowance or the Blind Persons’ Allowance.
A further announcement, that individuals within MTD ITSA will need to use software to file their tax return as well as their in-year updates, represents a significant shift for the MTD programme but will have little practical impact for those taxpayers using an agent to file their tax return. Unrepresented taxpayers, however, will need to take care to make sure that the MTD software they choose can handle all of their income and expenses.
The government has said that it is continuing to consider how to approach digitalisation for those with trading or property income under £20,000. We already know, however, that new digital services will be brought in to take those with trading or property income below £3,000 and individuals with employment income who need to pay the High Income Child Benefit Charge out of full Self Assessment.
Administration and compliance
Use of third party data
The government has launched a consultation on making better use of third-party data, with a primary focus on the financial account information and card sales information that is already reportable to HMRC. Accurately matching this data to taxpayers could provide benefits to both taxpayers – who could see bank interest pre-populated for Self Assessment purposes and more accurately coded out for PAYE – and for HMRC, who would be able to identify where amounts have been underreported.
A sticking point in the past has been the accuracy with which data can be matched, not least because third parties reporting the data are not currently required to provide a tax identification number (for example, a National Insurance number) when sending data to HMRC. This latest consultation sets out proposals to require suitable identification numbers – primarily National Insurance numbers for individuals and Company Reference Numbers for companies – to be collected and then reported alongside the data. Some questions remain (including what the appropriate identification number is for other entities such as partnerships) but these proposals represent an important step forward in joining up the information HMRC receives and making the Self Assessment process more straightforward for taxpayers. The consultation also looks at the potential for other types of data, including data on dividend and investment income, to be collected from third parties in future.
Technology and compliance
In her statement to Parliament, the Chancellor announced accelerated investment to transform the way government works. From a tax perspective this includes investment in artificial intelligence (AI) and analytics to target offshore non-compliance by wealthy individuals alongside a move towards the use of automated debt recovery processes.
In addition to technology, HMRC is looking at investment in people to help target avoidance and evasion and close the tax gap. This will include recruiting a further 500 compliance staff (in addition to headcount increases announced in the Budget) and also taking on “experts in private sector wealth management” to target offshore non-compliance. As the Exchequer Secretary to the Treasury announced a few weeks ago, there will also be a reformed reward scheme for those who provide information relating to tax avoidance and evasion in particular target areas, including large corporates and wealthy individuals.
The Spring Statement has also seen the publication of the two consultations (promised in last year’s Autumn Budget) putting forward measures to give HMRC more powers to identify and take action on marketed tax avoidance schemes and against advisers who help their clients evade tax.
The focus on avoidance and evasion is unsurprising: this was an area that the Labour Party committed to tackling in their manifesto. The specific areas being targeted are largely those traditionally associated with avoidance and evasion: it is worth noting, though, that on HMRC’s estimates the single biggest element of the tax gap relates to error and failure to take reasonable care by small businesses. Making inroads there is likely to depend on the success of programmes such as MTD ITSA and on wider digital transformation in HMRC: we expect to hear more on those areas when HMRC publishes their Transformation Roadmap later this year.
For further advice, please contact your local Moore office.